Is “Promotional Use Only” A Defense?

So, here’s an interesting case pending in Federal Court in Texas:  EsNtion, a dance music record label, has sued TM Studios, the maker and distributor of PrimeCuts, HitDisc, and other “Promotional Use Only” CDs, alleging copyright infringement for copying and distributing EsNtion’s songs (US District Court, Northern District of Texas, Dallas Division, Civil Case No. 07-CV-2027-L).

The case involves a contested number of songs released on EsNtion’s record label that TM Studios also distributed on its promotional compilation CDs.  Apparently TM Studios did not have express approval from EsNtion to distribute the songs.  However, TM Studios is defending the lawsuit, in effect, on the basis that it operates as a promotional use only service.  That is, TM Studios distributes its CDs only to radio stations and DJs for the benefit of record labels for the specific purpose of increasing the songs’ exposure and radio airplay. 

As a general rule, copying and distributing someone else’s music without permission on a promotional use only basis is not a defense to copyright infringement.  To copy and distribute someone else’s music, you should always assume you need permission, whether or not you sell the copies, operate on a non-profit basis, or even if you have an altruistic intent to promote the music.

TM Studios’ defense goes something like this:  EsNtion sent its music to TM Studios; the only reason EsNtion would have sent its music to TM Studios would be for inclusion on TM Studios’ promotional CDs; and therefore, TM Studios had an implied license to copy and distribute EsNtion’s songs.  Furthermore, TM Studios suggests that because of the promotional nature of its products, EsNtion suffered no damages.

Of course, it’s actually a bit more complicated. 

EsNtion argues that copying and distributing its music without any permissions or licenses being issued is simply illegal.  And in particular, EsNtion claims that TM Studios released the songs internationally, which EsNtion alleges severely damaged its ability to license and sell the songs overseas.

In defense, TM Studios claims that EsNtion had not registered many of the songs with the U.S. Copyright Office, and for others, that EsNtion was not the actual copyright owner. 

Before you even have grounds to file a copyright infringement lawsuit in federal court, the songs at issue must be registered with the Copyright Office.  And of course, you must be the actual owner of the copyright. 

For many of the songs, TM Studios argues that EsNtion had not timely or properly secured ownership of the copyrights from the original artists and writers.  Under the copyright law, an agreement to transfer a copyright (or other “instrument of conveyance”) must be in writing and signed by the owner of the rights being conveyed.  That is, a purported transfer of copyright is not valid without a written and signed document.  TM Studios says that EsNtion has been unable to produce such documents for many of the songs. 

Furthermore, even for the songs that EsNtion had registered with the Copyright Office, TM Studios argues that such registrations occurred after the subject songs appeared on TM Studios’ CDs.  Under the copyright law, you are not entitled to statutory damages if the songs are not registered with the Copyright Office at the time of the alleged infringement.

This will be an interesting case to watch as the litigation progresses.  The case, which was filed more than 1 ½  years ago, is currently near the conclusion of the discovery phase (during which the parties exchange records, testimony, and other information with each other).

While the outcome remains uncertain, the case provides numerous lessons for artists, record companies, and music providers, including the followings:

  1. You should have a written license before you assume it is okay to distribute someone else’s music. 
  2. You should be diligent about timely registering your original music with the Copyright Office.  Doing so is required before you can file an infringement action.  And registration provides certain benefits under the law, including entitling you to statutory damages and attorneys’ fees if your copyright is infringed. 
  3. A written and signed agreement is required to transfer ownership of a copyright.  You cannot assume that you own a song created by someone else unless you have a written transfer documented signed by the author (or other copyright owner). 
  4. Copyright disputes can be very expensive.  EsNtion is seeking over $26 million in damages.  TM Studios has indicated that it has already incured over $400,000 in attorneys’ fee thus far in the litigation.  

This case and the points above emphasize the importance of a comprehensive copyright management system.  If your business involves copyrighted material, you are well advised to have such a system in place to ensure that you are fully protecting your copyrightable works and properly licensing any use of copyrighted materials owned by others.

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